What is really meant by price vs value? And what this means when you want to increase client fees
Are you a small accountancy firm owner considering to increase your client fees? Do you wish you were a master on pricing for accountants? Do you worry that if you increase client fees, your clients might get upset and leave you? In this video, I present you with the key concept of price vs value. Understanding this, maybe subtle, but critical difference will empower you to put up your fees with confidence and without fear of having your clients push back on you.
How to increase client fees
I talk a lot with small firm accountants, and a constant hot topic is how do I increase client fees? How do I set my prices? Now, do I raise my fees as a small accountancy firm?
I’m going to look at today at a real key concept because there’s so much fear in your mind. “All my clients are going to go away if I raise my fees, if I don’t get my pricing right”. Actually, I just wanted to talk to you about a key concept, and it’s about value rather than price. Clients are not buying based on price; they’re based on the perceived value. I wanted to take you through a little scenario.
You need to buy a pair of gloves…
Imagine it’s a cold winter’s morning, and you need to walk to the station, get on the train and go to work. You realize as you get out of the house that you’ve forgotten your gloves, but the station’s only five minutes away. Do you buy a pair of gloves on the way? And if you do, how much would you pay for them? Let’s look at another scenario. It’s a warm summer’s day. You pass by the same shop that sells gloves five minutes from the station. Would you buy the gloves and now what would you pay?
It’s now minus five. It’s really cold, and you’re looking around the house, and you cannot find your gloves. Just cannot find them. But you think “I can do this”. And you get to the shop, and your hands feel like lead blocks. Your fingers have gone numb, and you’re really aching. You see a pair of gloves in the shop. Now would you stop and buy them? And how much would you pay for them?
Now let’s ramp that up another level. It’s the same cold winter’s morning. You can’t find your gloves, and you get to the shop, but you realize that your train’s being cancelled and you have to get to this place now. So you know you’ve got another 15 minutes to walk to the bus stop that will take you there and get you there on time. Remember, your hands are so cold that they’re in pain. Your fingers have gone completely numb, and you’ve got another 20 minutes of this before you can get on a bus, which there’s no guarantee it’s going to be warm. You know that when you get on the bus, you have to be able to use your hands. Now, how much would you pay for that same pair of gloves from that shop you’re just parsing and would you buy?
I suspect in all of these scenarios that there’s probably quite a significant difference. In the hot summer’s day, you probably would never buy the gloves because you just don’t need them. But as soon as your hands really start to hurt, as soon as you’re realizing a lot of pain, I imagine the amount you pay for a pair of gloves has gone up and up and up. And this is a key point about value.
Value is set by the buyer, not the seller. Secondly, the buyer is exceptionally context-driven. It’s about what’s going on in their world, and it’s also about the size of the pain that you are going to help them alleviate. That makes the difference.
So what does that mean in terms of your firm and pricing when it comes to raising your fees? Well, it means you’ve got to understand what your client values. And remember that scenario where the hands were so cold that they were in pain, and the fingertips had gone numb. What’s the accounting equivalent for your client? What is it that’s stressing them out? What’s worrying them? Where is their real source of pain? And that’s where you’re going to understand what they really value. And that’s where you can context the value of your services at the new price point and wanting to know what they value they’ll become less price sensitive.
So the key thing that I want to emphasise that when we consider increasing client fees, we’re often worried because we think people won’t accept a higher fee. But as long as they see your fee is still “value” and that it is still appropriate, you’ll have no problem with raising your fee.
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